The lineup of decisions on issues of lender force-placed insurance ("LFPI") now includes an en banc First Circuit decision in the Kolbe case. Some Courts cite this as controlling authority or precedent in favor of allowing certain LFPI practices. A closer look at the en banc decision in Kolbe shows that it is neither controlling authority nor precedent for LFPI business practices.
The Kolbe case has a confusing story to tell. The story began when a U.S. District Judge dismissed claims alleged by one Kolbe under New Jersey law. Mr. Kolbe alleged in his complaint that he incurred damages as a result of lender force-placed insurance.
Next, a panel of the First Circuit reversed on appeal. The reasons cited were similar to those already written in another case decided by the same panel on the same day, in a case decided under Massachusetts law: Lass v. Bank of America, 695 F.3d 129 (1st Cir. 2012).
Then came the en banc review in question. Three judges on the First Circuit looked away from the law of the forum state, New Jersey. They expressed their interest instead in the national economy and national policy. In their three-fold view, national concerns simply trumped Mr. Kolbe's concerns over his mortgage and the LFPI practices to which Mr. Kolbe -- and allegedly many others similarly situated -- was subjected as a result of his mortgage contract. Kolbe v. BAC Home Loans Servicing, LP d/b/a Bank of America, 695 F.3d 111 (1st Cir. 2012), overruled by an equally divided First Circuit en banc, 738 F.3d 432 (1st Cir. 2013).
Describing the second or en banc appearance of Kolbe in the First Circuit Court of Appeals as the decision of "an equally divided Court," may also tend to be confusing. Until you take a look at what it means. Here, it means that the entire en banc panel of First Circuit Judges was a total of six (6) people. (For comparison, most State Supreme Courts have at least seven (7) Justices.) Three (3) of the First Circuit Judges voted to affirm the District Judge, and three (3) voted to affirm the panel that decided the original appeal and reversed the District Judge. The District Judge's decision was the deciding vote, if you will, and so the order of dismissal was reinstated in this case. Concerning LFPI claims and defenses, see generally 2 Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" Sections 9:33, 9:35 and 11:25 (West Publishing Co. 3d Edition and 2014 Supp.)
Not much of a controlling decision. Nothing precedential to see here. If this were an accident scene, the police would say, "Move along."
© 2014 by Dennis J. Wall. All rights reserved. No claim to original U.S. Government works.
Please Read The Disclaimer.